The Part-Time, Freelance, Collaborative Economy

Are we becoming a part-time economy? Maybe. A collaborative economy? Possibly. A freelance economy? Definitely. Here's the evidence:

The Part-Time Economy- Involuntary part-time work is at a historic high, and the workforce participation rate is at a near-historic low. The number of unemployed people is higher, and the number of jobs in the economy is lower, than five years ago. During this weak recovery, more people have left the workforce than have started a new job, and a high percentage of the jobs that are being created are low-wage and part-time.

This is a catastrophic situation, both in personal and in national terms. On the personal level, people need work to pay the bills, save some money for their non-working years (if they ever arrive) and, I would argue, to stay connected to society by being and feeling useful. It has long been noted that Americans are prone to defining themselves in terms of their work, through which they find a sense of identity, purpose and self-worth.

On the national level, the country needs more citizens working more hours to pay taxes and to start to alleviate our unsustainable debt and unfunded liabilities.

For this miserable state of affairs, some blame the Affordable Care Act. Others say it is a temporary phenomenon, due to the lousy economy and low economic growth. Still others blame technology and/or globalization for displacing jobs, or the rising share of profits that go to capital instead of to labor. And finally, some say the shift to part-time is a myth.

According to a report from the Federal Reserve Bank of San Francisco, recessions always drive up part-time work, but what is different this time is that the part-time employment rate has remained higher for many more months than in past recessions. Also, states the report, the US labor market has recovered only about three-fourths of the jobs lost during the recession and its aftermath. In other words, general labor market slack is the key factor keeping part-time employment high.

My conclusion? Many more people would be working, and working more hours, if not for the four horsemen of recession/depression: high taxes, overregulation, a weak currency and political (policy) uncertainty. When things crashed some five years ago, I wrote that the effects would be with us for years: slow growth at best, high unemployment and underemployment, underinvestment by businesses, and an overhang of debt. Sorry to say I was right, and that what I most feared has come to pass: a “recovery” that leaves tens of millions behind.

How are millions coping?

The Collaborative Economy- A modern version of the “pooled resources” strategy practiced through the ages by affinity groups -- families, tribes, etc. -- has been updated for the 21st century through the use of technology. Those outside of traditional economies once banded together to survive, and then thrived, becoming part of new mainstreams. This is happening again today. We are seeing peer-to-peer sharing not only of content, but of goods and services, transportation, space and money.

Platforms that are hallmarks of this new economy include well known sites like Etsy, eBay, Craigslist, Kiva, and Kickstarter, as well as Rent the Runway, Lyft, Uber, and Airbnb. Apps and the internet are the new middle men of collaboration, connecting individuals. This economy also empowers entrepreneurs and hobbyists.

Sharing is the New Buying, a report by CrowdCompanies.com and VisionCritical.com, breaks individuals down into three categories, based on their level of participation in the collaborative economy. A shrinking majority of us (61% of Americans) are still in a category the report calls “non-sharers,” not yet having dipped into this realm. A smaller portion (23%) are “re-sharers,” using some of the more popular and more established services like eBay and Craigslist. But then there is a smaller, rapidly emerging group (16%) known as “neo-sharers.” These are the people who are early adopters of sites like Etsy, Lyft, and Kickstarter, engaging in more niche forms of collaboration.

The poor employment environment is one of the engines driving this trend, but once people become engaged in it, they may never go back to the traditional ways of doing things.

The Freelance Economy- One in three Americans, roughly 42 million, are estimated to be freelancers. By 2020, freelancers are expected to make up 50% of the full time workforce. Independent work is becoming more common across all generations.

As Jeff Wald writes in Forbes, the freelance economy is exploding at exactly the same moment that businesses are undergoing a major shift. Talent is moving from a fixed cost (and one that’s historically been one of the largest of a business) to a variable cost, with companies staffing up and down as needed.

The booming online staffing industry is also accelerating the growth of the freelance economy. This $1 billion industry grew 60% last year.

The online work marketplace oDesk recently announced that it hit $1 billion in work brokered between businesses -- many of them small -- and solopreneurs, freelancers who moonlight, and in many cases earn their entire living, online.

While it’s unlikely the majority of businesses will ever become completely freelance or remote — core staff need to work in proximity at any company of a certain size; local service-based businesses need people on site, though those can be freelancers — it's entirely plausible that more than half of the American workforce will one day log in or show up every day as independent contractors.

A surprisingly large percentage of working freelancers have day jobs to supplement their incomes. And for many, it's soon going to be the only option. By 2020, more than 40% of the US workforce will be so-called contingent workers, according to a study conducted by software company Intuit.

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Following the recent economic downturn, the employment rate has recovered at a frustratingly slow pace, except in one area: temporary, contingent, and independent workers. Between 2009 and 2012, according the Bureau of Labor Statistics, the number of temporary employees rose by 29%. A survey of the 200 largest companies found that temporary workers represented, on average, 22% of their workforce. Workers from all different industries, not just tech, are discovering that they’re able to be productive outside of the corporate office and without a long-term employer.

Even with the economy and hiring improving, freelancing is likely to become a much bigger part of the employment landscape, regardless of what workers prefer. Employers like having the flexibility to expand and contract their workforce, and the supply of available workers currently exceeds demand in many fields. Elance, one of many online freelance hubs that matches freelancers with clients, recently announced that hiring by businesses through its site increased by 60% last year.

Keep all this in mind every month when employment numbers are released by the Bureau of Labor Statistics; they’re missing the big story -- the part-time, collaborative and freelance economy. This is what explains how the workforce can shrink while the unemployment rate also declines. Sure, a lot of people are retiring or collecting some sort of disability, but the big trend is that there is tremendous growth in freelance and independent contracting work, part-time work, and collaborative types of work that fly under the radar.

Of the many repeating patterns I have discerned from decades of social and economic trend analysis, these are two of the most powerful: 1) what is outside the mainstream, if necessary or desirable, becomes mainstream, and 2) what is past is prologue.

Dr. Roger Selbert is a trend analyst, researcher, writer and speaker. Growth Strategies is his newsletter on economic, social and demographic trends. Roger is economic analyst, North American representative and Principal for the US Consumer Demand Index, a monthly survey of American households’ buying intentions.

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